Esoteric ABS Law Firm of the Year - Morgan Lewis
2019 was a year of huge growth for the structured finance team at Morgan Lewis. With that growth, and the strong interplay of the structured finance practice with other practice areas of the firm, Morgan Lewis was able to work on some of the most interesting esoteric ABS deals of the year. The number of lawyers working in the structured finance practice grew from 45 to 60 between mid-2018 and 2020. The bulk of the new additions arrived in 2019, when seven new lawyers joined the practice in Washington, D.C, and four joined in both New York and Chicago.
This increased presence brought new client relationships and new deals. “The broader our practice becomes, the more touch points we have with clients who want us to undertake their esoteric deals,” says Reed Auerbach, Partner and the global leader of the structured transaction group at Morgan Lewis in New York.
In 2019, the unsecured consumer market experienced tremendous growth and Morgan Lewis played a dominant role. It was involved in deals for some of the most prominent firms in the sector including SoFi, Marlette, Funding Circle, Upgrade, Upstart, Lending Club, Prosper, Lendmark and Freedom Financial. The group also represented a major investment bank in structuring a multi-platform marketplace loan acquisition warehouse facility which utilized blended advance rates to accommodate a dynamic collateral mix. “Our clients helped us build a tremendous presence in the marketplace lending space in 2019,” says Auerbach. “It was a market that kept growing throughout the year.”
During the year the group also worked on a securitization of tugboat and barge charters, a sector which is subject to regulation under the Jones Act. The Jones Act places certain restrictions on the ownership of these vessels, which needed to be taken into account when structuring the default provisions of the financing package. It also worked on a number of innovative healthcare receivables deals, as well as mobile handset receivables securitizations, equipment lease securitizations, solar energy deals, and alternative mortgage securitizations. It also won the competitive pitch for the repeat business of subprime auto finance company Exeter Finance.
According to Auerbach, a combination of corporate, structured finance and regulatory and legal expertise is needed to successfully undertake these esoteric ABS deals. “These deals tend to be hybrids,” he says. “But the diversity of the practice within our structured finance group, and close interaction with other areas of the wider firm, allow us to deploy technology across different asset classes. After all there are not many firms that have both a first-rate shipping regulatory practice and structured finance practice.”
This cross pollination of ideas, structures and practices from one area of the market to another is one of the keys to the success of Morgan Lewis’s Esoteric ABS practice. Indeed, the firm’s forward thinking on these issues is reflected in the serious approach it takes to thought leadership in general. Nearly every member of the structured finance practice regularly contributes to regular updates of the treatise Offerings of Asset-Backed Securities, in which their new thinking can be shared. Unlike much thought leadership, which tends to also serve as marketing, this treatise is genuinely instructive and often found on clients’ desks. “We put a lot of effort into our thought leadership,” says Auerbach. “It takes a lot of time, but it reinforces our credibility and our clients now expect it of us.”
Morgan Lewis also takes its wider regulatory work seriously. Auerbach is Emeritus Director of the Washington D.C.-based Structured Finance Association. The firm is also serving as counsel to the Alternative Reference Rates Committee (ARRC), a group of private market participants convened by the Federal Reserve Board and the New York Fed that is one of the main bodies overseeing the transition from Libor to Sofr.